J.B. Hunt Transport Services
) has increased its quarterly dividend to 15 cents from 14 cents
paid in November 2012. The company declares dividend hikes in
February each year. However, this time the company announced the
hike for 2013 earlier and expedited the payments in order to
benefit from the lower prevailing tax rates.
The recent hike was made in order to benefit from the lower
prevailing tax rates. Tax rates are expected to move up next year
owing to government policies on fiscal cliff. Depending upon
investors' dividend, income tax rates can move as high as 43.5%.
Therefore, early payment would be a relief for investors
shielding their dividend incomes from high tax cuts to some
In 2013, the company does not intend to pay a quarterly
dividend until its board meeting in April.
Despite the ongoing upheaval in the truck market, J.B. Hunt
continues to maintain its yearly growth in shareholder returns.
The company paid quarterly dividends of 11 cents, 12 cents and 13
cents per share in 2009, 2010 and 2011, respectively. For 2012,
the company increased its quarterly dividend payment to 14 cents
per share. Besides dividend payment, the company initiated a new
share repurchase program of $500 million in 2011. As of September
30, 2012, the company had $503 million remaining in its share
repurchase authorization under its two share buyback program
initiated in 2010 and 2011.
We believe that the increase in returns to shareholders comes
on the back of stronger freight demand, thanks to the company's
diversified business model and improving price mix.
The company is greatly benefiting from two of its major
segments, Intermodal and Dedicated Contract Services (DCS), which
contributed more than 80% to the total revenue in the third
quarter of 2012.
The company expects double-digit intermodal volume growth over
the near term as the intermodal market fundamentals strengthen
relative to trucking. We believe the company will continue to see
solid intermodal volume growth in its eastern network. Also,
volume growth in the West will gain momentum as intermodal
services continue to benefit from shippers converting freight
from truck to rail.
Going further, we believe the company's expansion of service
offerings in countries like Mexico and pricing gains on contract
maturities will provide a significant basis for Intermodal's
growth. The other segment, DCS is evolving into a highly
specialized fleet with greater focus on final mile (i.e.,
residential) delivery, which is expected to achieve double-digit
revenue growth in the long term.
However, higher operating cost with increased compensation
expenses and third party driver cost continue to weigh on revenue
growth. We believe significant growth in transportation cost
stemming from tightening of capacity in the truck market amid
truck load conversion to rail intermodal may affect the company's
Further, the company faces intense competition from other
truckload carriers such as
YRC Worldwide Inc
Consequently, we are maintaining our long-term Neutral
recommendation on J
B. Hunt, with a Zacks Rank of #3 (Hold).
CON-WAY INC (CNW): Free Stock Analysis Report
HUNT (JB) TRANS (JBHT): Free Stock Analysis
YRC WORLDWD INC (YRCW): Free Stock Analysis
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